FINANCING DEVELOPMENT

Financing development of movie projects can sometimes be even trickier than finding financing for production. You might have pitched your idea for a distributor and investors, who likes it – and asks you to come back with a script and a business plan – This where the famous “catch 22”-moment arises. You have a good idea, but not money enough for development. This is where the question on how to finance development comes into play.

WHAT DEVELOPMENT IS

The first step of developments is the process of producing a script from a story idea, since this is the foundation for any other work of development. However, development is much more than just writing, and generally speaking one can say that all work that moves the production towards a “green light” (secured financing and distribution) – is in some form development. In other words, everything that amounts to “package” a project by recruiting, casting, negotiation with financiers and distributors – and not to forget: Writing the business plan!

FUNDING TYPES

The most common types of funding are various forms of deferred payments. Perhaps mainly to producers, but also to writers and casting agents, who might defer a substantial portion of their fee until the movie has a “green light”- then usually paid out on first day of production. However, deferment is not the only way to go – there are some cash available through development funds set up by some distributors, larger production companies, film festivals and government institutions – whom can support the development, either as a form of charity/subsidy or as a co-producer and equity partner. It’s also possible to structure the development with a form of senior financing or venture capital, where the investment sole purpose is to develop a project and get it into production (so called “seed money”).

EXIT
A very important issue when you structure development financing, is when the investor can see return of the investment. Deferred payments can in some cases be turned into equity or in other ways be ties to the completion of the picture and possible profits. For “seed money” that is a form of senior financing or venture capital it’s, however, often a better idea to try to structure an exit that is tied to when the projects enter into production. That is to say, that the producer might agree not to start any shooting until who ever financed the development have seen return on their investment. So if a producer has raised a $20,000 for script development, he or she might agree that the investor should see a 200% return on the investment – so the producer then needs to pay out $60,000 before the first day of shooting (and this is then part of the production budget, the producer needs to raise funding for). This makes the investment more perspicuous and the investment has a shorter time frame – and at the same time the high rate of return is related to the high risk that the investors enter into. This is due to the fact that it’s only one out of ten scripts that on average ends up being produced (since the producers in most cases never succeed in raising financing and/or securing distribution). A profit margin on 200% then has to be put in to relation that the most probable scenario is that the investor won’t see any return on his investment, at all.

DEVELOPMENT PLAN

When you a apply for development funding it’s very important that you have a development plan in writing, the same way you would have a production plan and/or business plan when seek financing for production. For a development plan it’s often wise to organize the development in steps, where you tie such things as writers fees to the completion of different steps (synopsis, outline, first draft, re-writes) – a so called “step deal”. You should also put the organization down in writing. Whose involved and what kind of executive power do they have over the creative process? What script doctors, consultants and experts advisers will be used? You should also write a time schedule and an activity chart that illustrates for how long the development will continue and when the project is expected to go into production. At the same time you should he open and flexible that things might change drastically. Few things are so hard to predict and to plan ahead for, as script development. The exact length of the development process varies, but expects anything from 6-8 months up to a few years. The average is probably around 1-2 years.